Zalando Chief Says Company Focused on Fashion, Not an Exit

BERLIN— 2014 was supposed to be the year that Berlin-based Zalando SE, Europe’s largest online retailer, went public.

But with speculation increasing that Rocket Internet GmbH, an active start-up accelerator in Berlin and an early investor in Zalando, will be launching an IPO of its own this year too, the shoe and clothing retailer has had to share the spotlight with its own incubator.

Rocket Internet’s founders, the Samwer brothers, also have a stake in Zalando. A spokesperson for the company said he wouldn’t comment on rumors.

Zalando has been growing rapidly, reporting a 50% rise in sales to €1.8 billion in 2013, increasing expectations that an IPO is imminent.

Recent moves like changing its legal structure from a limited to a full blown public company, and adding former Deutsche Telekom CEO Kai-Uwe Ricke to its advisory committee, have more to do with fashioning corporate governance structures in line with a company that has billions of euros in turnover, spokesman Boris Radke said.

The company says it’d be foolish not to explore an IPO, but said that it hasn’t made a decision.

But with profitability coming online sometime in 2015, the window for early investors to get the most out of their investment by going public may be closing.

Robert Gentz, Zalando’s founder and CEO, doesn’t want to talk about IPOs, he’d rather talk operations.

“The last two years we’ve worked hard to professionalize every part of the company,” Mr. Gentz said in an interview.

Zalando has been working with laser-like focus to improve its business, said Mr. Gentz , adding that he doesn’t like to think of an IPO as an exit.

“No one here is thinking in terms of an exit. We are focusing on fashion, user experience, and logistics. The core of our USP,” he said.

Retail fashion in Europe is a huge market, with some analysts putting a conservative estimate at €200 billion a year, which would make Zalando’s current sales less than 2% of the potential market.

With expansion beyond its core German-speaking European markets improving, and competitors like Asos PLC struggling with a strong British pound, a sustainable path for an independent Zalando in Europe seems straightforward, beyond the hype of an IPO.

But if Zalando does decide to IPO, it would be the first time a German start-up had made it into the big leagues without selling to an American competitor.